SAL Automotive Ltd Management Discussions

COMPANY PROFILE

SAL Automotive Limited ("SAL" or "the Company") is a leading manufacturer of automotive components and agricultural implements, catering to some of Indias foremost Original Equipment Manufacturers (OEMs) across the passenger vehicle, commercial vehicle and tractor segments. Over the years, the Company has established a strong reputation for engineering excellence, product quality and reliable customer service, making it a preferred supplier to leading automobile manufacturers.

The Companys automotive portfolio comprises a comprehensive range of seating systems, seat mechanisms, seat frames and precision-engineered sheet metal components, developed to meet the evolving requirements of the automotive industry. Through continuous product development, technological upgradation and a strong focus on quality, SAL delivers innovative, reliable and value-driven solutions that enhance customer satisfaction.

Complementing its automotive business, SAL has built a strong presence in the agricultural implements segment through the manufacture of a wide range of farm equipment, including rotavators, planters, rotary tillers, box scrapers and other agricultural implements. The Company continues to expand its product portfolio in line with the increasing demand for farm mechanisation and modern agricultural practices.

Driven by a customer-centric approach, operational excellence and a commitment to continuous improvement, SAL remains focused on strengthening its manufacturing capabilities, expanding its product offerings and building long-term partnerships with its customers. With a diversified business portfolio, experienced management team and unwavering commitment to quality, the Company is well positioned to capitalise on emerging opportunities in both the automotive and agricultural sectors while creating sustainable value for all its stakeholders.

FINANCIALS OVERVIEW

While details of financial position and performance, for the financial year ended 31 st March 2026 (the Financial Year), are available in the Balance Sheet, Statement of Profit & Loss, along with related notes, key aspects are highlighted in the following paragraphs:

		(Rs. in Crores)
Particulars	2025-26	2024-25
Automotive Components: -	187.65	147.86
- Seats for T ractor & Commercial Vehicle	116.98	90.89
- Seat Mechanisms	19.19	16.30
- Seat Frames	47.63	40.67
- Others	3.85	3.85
Agriculture implements	196.79	222.47
- Rotavators	183.92	219.28
- Veg Planter & Others	12.87	6.77
Net Revenue from Operations	384.44	377.76
Other Income	2.32	1.73
Total Revenue	386.76	379.49

- Equity & Reserves

The Companys net worth as on 31st March 2026 stood at Rs. 46.12 crores (previous year Rs. 43.03 crores) comprising of an equity component of Rs. 4.80 crores (previous year Rs 2.40 crores) and Reserves & Surplus of Rs. 41.32 crores (previous year Rs 40.63 crores).

Book value per share having facing value of Rs 10 each is Rs 96.17 per share (previous year Rs. 179 per share). Dip in book value is primarily due to increase in number of shares post issuance of Bonus shares in the ratio of 1:1.

- Trade Receivables

Trade receivables as at 31st March 2026 stood at Rs. 56.99 crores (previous year Rs. 44.22 crores) having debtor turnover ratio of 7.60 times (previous year 9.33 times).

- Trade Payables

Trade payables as at 31st March 2026 stood at Rs.59.20 crores (previous year Rs. 49.85 crores).

- Cost of Material Consumed

During the Financial Year, the global economy experienced a geo-political crisis in middle east which led surge in commodity and fuel prices.

Despite the impact on raw material and other costs, SALs management diligently worked to mitigate the effects and keep the expenses under control. Through their efforts, the company was able to improve raw material cost as a percentage of net revenue from operations. This figure stood at 77.9%, compared to the previous years level of 79.5%.

SAL remains committed to adapting to market fluctuations while ensuring the production of high-quality automotive components and agricultural implements. Our focus on efficient cost management and development of new products as per requirements will deliver value to our customers in the upcoming financial year.

_ Other Overheads

Consisting of personnel cost, manufacturing expenses, administrative expenses and sales & distribution expenses during the year were Rs.74.50 crores (previous year Rs. 64.70 crores), which includes an amount of Rs 0.58 crores related to increase in gratuity and leaves liability on past services cost due to notification of provisions of Labour codes by the government during Nov25..

_ Depreciation & Amortization

Depreciation for the year stood at Rs. 4.31 crores against previous year figure of Rs. 4.28 crore which increased primarily due to additional Capex made during the year under review.

- Results

Reflecting the above and after considering finance cost, Profit/(Loss) before Tax was Rs. 5.89 crore (previous year Rs. 7.87 crore. Total Comprehensive Income for the current year was Rs. 4.29 crore (previous year Rs. 5.27 crore)

The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (Ind AS) notified under the Companies Act 2013 as per the Section 133 read with rule 3 of Companies (Indian Accounting Standards) Rules, 2015 as amended and other relevant provisions of the Act.

The accounting policies have been consistently applied.

INTERNAL FINANCIAL CONTROL SYSTEMS & THEIR ADEQUACY

The Company has in place an adequate and effective system of Internal Financial Controls ("IFC") commensurate with the size, scale, nature, and complexity of its business operations. The internal financial control framework has been designed to provide reasonable assurance regarding the orderly and efficient conduct of business, safeguarding of assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, compliance with applicable laws and regulations, and the timely preparation of reliable financial information.

The Company has established well-defined policies, standard operating procedures, delegation of authority, approval matrices, and business processes to ensure that transactions are authorized, recorded, and reported appropriately. The internal control framework is supported by an appropriate information technology environment, periodic management reviews, and continuous monitoring mechanisms to enhance operational efficiency and financial discipline.

The Company has an independent Internal Audit function that carries out risk-based internal audits in accordance with an annual audit plan approved by the Audit Committee. The Internal Auditors periodically evaluate the adequacy and operating effectiveness of internal financial controls, risk management processes, governance practices, and compliance with internal policies and applicable statutory requirements. Significant audit observations, together with the status of corrective actions, are reviewed by the Audit Committee and the management to ensure timely implementation of remedial measures.

The Finance and Accounts function comprises experienced and qualified professionals who are responsible for maintaining robust financial reporting processes, ensuring compliance with applicable accounting standards, statutory requirements, and internal policies, and supporting effective financial governance across the Company.

The Audit Committee, on behalf of the Board of Directors, regularly reviews the effectiveness of the internal financial control system, internal audit reports, financial reporting processes, compliance framework, related party transactions, risk management practices, and the adequacy of internal control measures. The Board places significant reliance on the oversight exercised by the Audit Committee in strengthening the Companys governance framework.

Based on the evaluation carried out by the management, the reports of the Internal Auditors, the observations of the Statutory Auditors, and the review undertaken by the Audit Committee, the Board is of the opinion that the Company has, in all material respects, an adequate system of Internal Financial Controls over financial reporting, and that such controls were operating effectively throughout the Financial Year 2025-26. During the year under review, no material weakness or significant deficiency in the design or operating effectiveness of the Internal Financial Controls was observed that could have a material impact on the Companys financial statements.

HUMAN RESOURCES

SAL firmly believes that its people are its greatest strength and a key driver of sustainable growth. The Company continues to foster a performance-oriented, collaborative and inclusive work culture that encourages innovation, continuous learning and open communication across all levels of the organisation. This peoplecentric approach has enabled SAL to build a committed, skilled and motivated workforce capable of supporting the Companys long-term business objectives.

The Company has established a robust Performance Management System (PMS) to objectively evaluate individual and organisational performance. The framework aligns employee goals with the Companys strategic priorities and links performance with rewards and career development opportunities, thereby promoting a culture of accountability, meritocracy and continuous improvement.

Recognising that capability development is essential for long-term competitiveness, SAL continues to invest in employee learning and skill enhancement. A structured training and development framework is in place to identify competency gaps and deliver need-based technical, behavioural and functional training programmes. These initiatives enable employees to upgrade their skills, adapt to changing business requirements and contribute more effectively to organisational success.

Industrial relations remained cordial and harmonious throughout the year. The long-term settlement with the workers union continued to provide a stable industrial environment, fostering mutual trust, constructive engagement and uninterrupted operations across the manufacturing facilities. The Company values its employees as key stakeholders and remains committed to maintaining a positive and collaborative workplace.

SAL also places the highest priority on occupational health, safety and employee well-being. The Company continued to strengthen its safety culture through strict adherence to statutory safety standards, regular safety audits, awareness programmes and preventive measures aimed at creating a safe and healthy workplace. Continuous improvement in safety practices remains an integral part of the Companys operational excellence framework.

The Company remains committed to nurturing talent, encouraging employee engagement and building a high-performance organisation. By investing in its people, strengthening leadership capabilities and promoting a culture of safety, learning and collaboration, SAL is well positioned to meet future business challenges while creating sustainable value for its employees, customers and other stakeholders.

Regular employee strength as on 31st March 2026 stood at 342 (as on 31st March 2025 - 324)

INDUSTRY STRUCTURE AND DEVELOPMENTS

FY 2025-26 marked another year of resilience for the Indian automotive industry, demonstrating its ability to adapt to a challenging global and domestic operating environment. Although inflationary pressures, supply chain disruptions, geopolitical uncertainties, and elevated commodity prices continued to influence business conditions, improving domestic demand, supportive government policies, and stable economic fundamentals enabled the industry to maintain its growth trajectory. The latter part of the year witnessed a notable improvement in market conditions, resulting in stronger production and increased demand across most vehicle segments. In addition, the GST rate realignment during the year impacted the working capital position by shifting a significant portion of GST cash outflows into recoverable gSt refund receivables, thereby increasing working capital requirements until such refunds are realised.

The Indian automobile industry registered a healthy production growth of 11.8% during the financial year, with total vehicle production increasing to 3.47 crore units from 3.10 crore units in FY 2024-25. Growth was broad- based across all major segments, reflecting the strength of domestic consumption as well as improving supply-side conditions. Passenger vehicle production increased by 9.4%, commercial vehicles by 13.3%, three-wheelers by 23.8% and two-wheelers by 11.8%. The sustained momentum across these segments highlights the continued expansion of the Indian automotive ecosystem and reinforces the countrys position as one of the worlds fastest-growing automobile markets. (Source: Society of Indian Automobile Manufacturers - SIAM).

The agricultural machinery industry also delivered an encouraging performance during the year. Supported by favourable rural demand, healthy farm incomes and increasing adoption of mechanised farming practices, tractor production grew by 23.3%, reaching 12.42 lakh units compared with 10.08 lakh units in the previous financial year. The robust performance of the tractor segment reflects the continued emphasis on improving agricultural productivity and rural infrastructure. (Source :Tractors Manufacuring Association.)

As a key supplier to both the automotive and agricultural equipment sectors, SAL remained well positioned to benefit from these favourable industry trends. The Company continued to manufacture and supply seating systems, seat mechanisms and agricultural implements to leading OEMs in the passenger vehicle, light commercial vehicle, tractor and agricultural equipment segments. The Companys diversified customer base and strong manufacturing capabilities enabled it to effectively address evolving customer requirements while maintaining consistent standards of quality, reliability and timely delivery.

During the year, SAL remained focused on strengthening operational efficiency, enhancing product quality and deepening customer partnerships. Despite challenges such as volatility in raw material prices, intermittent shortages of critical components and changing global trade dynamics, the Company continued to demonstrate operational resilience through disciplined execution, prudent cost management and a customer-centric approach.

Looking ahead, the Company believes that favourable long-term fundamentals, increasing vehicle penetration, continued infrastructure development, rural demand and the Governments ongoing focus on manufacturing and agricultural growth will continue to create opportunities for the automotive and farm equipment industries. With its established market presence, experienced management team and commitment to innovation and operational excellence, SAL is well positioned to leverage these opportunities and create sustainable value for all its stakeholders.

OUTLOOK/OPPORTUNITIES

The outlook for the Indian automotive and tractor industries during FY 2026-27 remains positive, supported by favourable macroeconomic fundamentals, continued infrastructure investments, improving rural consumption and sustained policy support for domestic manufacturing. While the industry is expected to face challenges arising from global geopolitical uncertainties, commodity price volatility and evolving trade dynamics, Indias resilient domestic demand and expanding manufacturing ecosystem are expected to underpin long-term growth.

The automotive industry is likely to witness steady growth across major vehicle segments, driven by rising disposable incomes, urbanisation, increasing replacement demand and continued investments by OEMs in new products and technologies. Government initiatives aimed at strengthening manufacturing competitiveness, improving logistics infrastructure and promoting cleaner mobility are expected to further support industry expansion. However, manufacturers will continue to monitor supply chain resilience, availability of critical components, fluctuations in raw material prices and changing regulatory requirements, all of which could influence operating margins.

The commercial vehicle segment is expected to benefit from sustained public infrastructure spending, higher freight movement and increased construction and mining activities. Passenger vehicle demand is likely to remain healthy, supported by new model launches, premiumisation and growing consumer preference for technologically advanced vehicles. The two-wheeler industry is also expected to maintain its recovery trajectory, aided by improving rural demand and stable financing conditions.

The tractor industry is expected to sustain its positive momentum, supported by favourable agricultural prospects, higher farm mechanisation, government initiatives for rural development and continued investments in the agricultural sector. Timely monsoons, improved crop realisations and higher rural incomes are expected to support tractor demand during the year. At the same time, continued focus on precision farming and farm productivity is likely to create additional opportunities for agricultural equipment manufacturers.

For SAL, the growth prospects of both the automotive and tractor industries provide a favourable business environment. The Company will continue to focus on strengthening customer relationships, expanding its product portfolio, enhancing manufacturing efficiencies and maintaining the highest standards of quality and delivery. Through continuous innovation, operational excellence and prudent cost management, SAL remains well positioned to capitalise on emerging opportunities while effectively navigating potential market uncertainties.

Overall, the medium- to long-term outlook for both the automotive and tractor industries remains encouraging, underpinned by Indias strong economic fundamentals, increasing domestic consumption, expanding manufacturing capabilities and favourable demographic trends. The Company remains confident of sustaining its growth trajectory and creating long-term value for its stakeholders.

NEW DEVELOPMENTS

During FY 2025-26, SAL continued to strengthen its position as a trusted manufacturing partner, leveraging the significant opportunities emerging from Indias growing manufacturing ecosystem. Supported by the Government of Indias Make in India initiative, the country continues to establish itself as a preferred global manufacturing destination, with the automobile sector remaining one of the key pillars of this transformation. Continued investments by global and domestic OEMs in expanding manufacturing capacities across India are expected to further strengthen the automotive supply chain and create long-term growth opportunities for the auto component industry.

The western and southern regions of India have emerged as major automotive manufacturing hubs, attracting substantial investments from vehicle manufacturers and component suppliers. In line with these industry developments, the Company is evaluating opportunities to establish manufacturing facilities in proximity to these automotive clusters. Such expansion will enable SAL to enhance customer proximity, improve operational efficiencies, optimise logistics and strengthen its presence in the fast-growing auto ancillary sector.

The agricultural implements business continued to be a significant contributor to the Companys overall performance. During the year, this segment, primarily comprising contract manufacturing of rotavators and allied agricultural implements, accounted for approximately 51 % of the Companys total revenue. Encouraged by the growing demand for farm mechanisation and the favourable outlook for the agricultural sector, SAL has expanded its product development initiatives by introducing new products within this segment. The Company expects this business to remain an important driver of future growth.

The automotive business also witnessed continued focus on product expansion and capability enhancement. SAL is strengthening its seating systems portfolio through the development of new-generation seats for buses and electric vehicles, while simultaneously expanding its seat frame business for passenger and commercial vehicles. These initiatives are expected to enhance the Companys product offerings and contribute meaningfully to revenue growth over the medium term.

In addition, the Company has broadened its capabilities in tractor sheet metal components through the successful development of new products. This expanded product portfolio is expected to support deeper engagement with existing customers, create opportunities with new OEMs and contribute to sustained business growth in the coming years.

Going forward, SAL remains committed to expanding its manufacturing capabilities, diversifying its product portfolio and strengthening strategic partnerships with customers across the automotive and agricultural equipment sectors. By leveraging its engineering expertise, manufacturing excellence and customer-centric approach, the Company aims to capitalise on emerging opportunities, enhance operational competitiveness and deliver sustainable long-term value to all its stakeholders.

THREATS, RISKS & CONCERNS

As a leading supplier of components to tractor and automobile Original Equipment Manufacturers (OEMs), SALs business performance is closely linked to the growth and overall health of these industries. The Companys operating environment is influenced by several external factors, including agricultural output and monsoon performance, rural income levels, Government policies and regulatory reforms, availability and cost of financing, interest rate movements, commodity price fluctuations, supply chain stability, evolving emission and safety regulations, and the competitive intensity within the automotive and agricultural equipment sectors.

The tractor industry, in particular, remains sensitive to rural economic conditions, farm incomes and seasonal factors. Variations in rainfall, agricultural productivity and Government support measures can influence farmer sentiment and, consequently, demand for tractors and farm equipment. Similarly, the automotive industry continues to operate in a dynamic environment characterised by changing consumer preferences, technological advancements, regulatory developments and volatility in raw material prices.

While short-term market fluctuations and macroeconomic uncertainties may impact industry performance, the long-term fundamentals of both the automotive and agricultural sectors remain robust, supported by increasing mechanisation, infrastructure development, rising vehicle penetration and sustained policy support for manufacturing and rural development.

SAL continues to proactively monitor industry developments and emerging market trends to ensure timely and effective business responses. The Company remains focused on strengthening customer relationships, diversifying its product portfolio, improving operational efficiencies and enhancing manufacturing capabilities to mitigate business risks. Its diversified presence across both automotive and agricultural equipment segments, coupled with long-standing customer partnerships and a prudent risk management framework, enhances its ability to withstand market volatility and capitalise on emerging growth opportunities.

With a strong focus on innovation, quality, operational excellence and customer satisfaction, SAL remains confident of sustaining its growth trajectory and creating long-term value for all stakeholders, while effectively navigating the evolving business environment.

The details of changes in the key financial ratios as compared to previous year are stated below:

Sr. No. Particulars	2025-26	2024-25	Change(%)	Reason
1 Debtor Turnover Ratio	7.60	9.33	-19%	Down due to extended credit days with new customers over other customers having lesser credit days and decrease in sale with these customers.
2 Inventory Turnover Ratio	11.89	13.46	-12%	Down due change in product mix and lesser offtake in last quarter.
3 Debt Service Coverage Ratio	1.35	1.89	-29%	Declined due to decrease in earnings during the year.
4 Current Ratio	1.17	1.19	-2%	Down due to increase in working capital parameters viz Debtors, Inventory Creditors and accruals from Govt authorities.
5 Debt Equity Ratio	0.72	0.51	+41%	Primarily due to additional borrowings availed and decrease in earnings during the year.
6 Operating Profit Margin (percentage)	1.6	2.2	-30%	Revenue growth in segment biz where contribution margin is lower and increase in other overheads has impacted the overall margins.
7. Net Profit / (loss) (percentage)	1.1	1.4	-20%	Revenue growth in segment biz where contribution margin is lower and increase in other overheads has impacted the overall margins.
8 Return on Net Worth (percentage)	9.3	12.3	-24%	Primarily due to decrease in profits.

ACCOUNTING TREATMENT

The financial statements of the Company are prepared under historical cost convention, on accrual basis of accounting, and in accordance with the provisions of the Companies Act, 2013 (the Act) and comply with the applicable Indian Accounting Standards.

CAUTIONARY STATEMENT

Statement in the Management Discussion and Analysis Report describing companys objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied.

	For and on behalf of the Board
	Rajiv Sharma
	Chairman
Place: Ghaziabad	DIN :07418337
Date: 13th August, 2026